markets – Macleans.cahttps://www.macleans.ca
Canada's national current affairs and news magazine since 1905Thu, 24 May 2018 18:07:14 +0000en-UShourly1https://wordpress.org/?v=4.9.4TSX in for further tepid performance following mildly positive first quarterhttps://www.macleans.ca/news/tsx-in-for-further-tepid-performance-following-mildly-positive-first-quarter/
https://www.macleans.ca/news/tsx-in-for-further-tepid-performance-following-mildly-positive-first-quarter/#commentsMon, 01 Apr 2013 09:50:33 +0000http://www2.macleans.ca/?p=366500TORONTO – The Toronto stock market goes into the second quarter of 2013 trading down from its best levels of the year and not a great deal of hope that…

]]>TORONTO – The Toronto stock market goes into the second quarter of 2013 trading down from its best levels of the year and not a great deal of hope that global economic conditions will improve to a point where the resource-based market can gain traction.

But during the coming week, traders will look to assurance that job growth remains strong while keeping a wary eye on countries most impacted by the eurozone debt crisis.

The TSX ended the January-March period up a slight per cent year to date, down from highs of mid-March when the market was ahead about 3.5 per cent.

In contrast, a stream of positive economic indicators, including a resurgent housing sector, and continued stimulus measures from the U.S. Federal Reserve helped power the Dow Jones industrials to a series of record-high closes, leaving the blue chip index up almost 12 per cent year to date.

But looking ahead, the resource-heavy TSX will continue to be hobbled by a stubbornly slow global economic recovery.

“I think it really is a function of commodity prices not really going anywhere because it’s a tepid global recovery and most of the revisions in terms of growth expectations that occurred over the quarter have been downwards,” said Norman Raschkowan, North American strategist at Mackenzie Investments.

“People initially had some positive adjustments to the view on China and now those have sort of reversed and for the U.S., things have been probably OK and data particularly on the housing side has been positive. I think that’s been overwhelmed in the global context by the estimates for Europe being revised downwards pretty materially.”

Miners led TSX losers by a long shot, with the Global Gold Index losing while the Metals and Mining group fell per cent.

However, it wasn’t all bad news as the financial sector gained per cent while the energy component rose per cent.

At the same time, Raschkowan says that it’s hard to see what can drive the U.S. market up from here.

“It wouldn’t surprise me if the U.S. market pauses here,” he said.

“It’s hard to see anything definitive so maybe you have a drift higher or sideways until there is another new development that is positive.”

The eurozone debt crisis will likely weigh on markets in the wake of a controversial bailout secured by the tiny Mediterranean nation of Cyprus at the beginning of last week.

Early relief gave way to concern that the Cyprus bailout agreement may be a model for the future since for the first time, many large depositors will lose a big chunk of their money as part of the pricetag for securing the money.

“The people for whom this is really a game changer is corporate treasurers and companies that hold large amounts of cash in transit let’s say in banks, and they’re not going to be prepared to leave that money in a bank that they consider to be in a risky locale,” said Raschkowan.

“And whether it’s Spain, or Greece or Portugal or Italy, I think that’s where you’re going to see a meaningful impact from its decision.”

The major economic reports of the week come out Friday.

In the U.S., traders hope to see another month of job gains around the 200,000 mark. Economists expect the government report will show that the economy created about 190,000 jobs during March after cranking out 236,000 during February, with the jobless rate staying unchanged at 7.7 per cent.

In Canada, Statistics Canada was expected to report that about 10,000 jobs were created during March. However, CIBC said in a note that it expects only about 5,000 new positions following a blowout performance in February when 50,700 jobs were created.

“While resource-sector hiring could fare better, public sector headcounts were likely trimmed with the ongoing drive to restrain public sector costs,” said CIBC World Markets economist Emanuella Enenajor.

]]>https://www.macleans.ca/news/tsx-in-for-further-tepid-performance-following-mildly-positive-first-quarter/feed/1Investors wonder if rally on markets can withstand economic headwindshttps://www.macleans.ca/economy/business/investors-wonder-if-rally-on-markets-can-withstand-economic-headwinds/
https://www.macleans.ca/economy/business/investors-wonder-if-rally-on-markets-can-withstand-economic-headwinds/#commentsSun, 10 Mar 2013 11:54:09 +0000http://www2.macleans.ca/?p=358871TORONTO – Stock markets could be looking for some direction this week following a muted response to blowout employment numbers on Friday, capping a week that saw New York’s Dow…

]]>TORONTO – Stock markets could be looking for some direction this week following a muted response to blowout employment numbers on Friday, capping a week that saw New York’s Dow Jones industrials register a string of record high closes.

The TSX ended the week with slight pop, up 0.48 per cent, weighed down by gold stocks but New York registered strong gains, with the Dow gaining 2.18 per cent.

This means the Dow has more than made up the losses stemming from the 2008 financial collapse, rising over 115 per cent from the lows of March 2009 that resulted from the financial collapse and subsequent recession.

However, the TSX is still a good 2,300 points away from the all-time high of 15,073 from the summer of 2008.

Several items added up to improve sentiment, including strong trade data from China, positive news on U.S. home prices, a U.S. services sector expanding stronger than thought and then a jobs report showing the creation of 236,000 jobs last month. Also, the U.S. jobless rate edged down 0.2 of a point to 7.7 per cent, the lowest level in four years.

In Canada, the economy churned out a surprisingly strong 50,700 new jobs in February, most of them full-time, in the private sector and in Ontario.

Adding it all up, the average retail investor could think there’s nothing standing in the way of more gains, but that could be a mistake.

“I think a lot of the rally that we’ve seen in the last two months almost seems as a correct predictor of the (jobs) data”, said Andrew Pyle, senior wealth advisor and portfolio manager at ScotiaMcLeod in Peterborough, Ont.

“In other words, we may have already seen the bulk of whatever market gains we were going to get from numbers like this, at least for the professional money from this market.”

Pyle points out that the bulk of the recovery from the lows of March 9, 2008 have been “on the backs of what I would call professional money.”

“Retail money, we know for a fact, mainly sat on the sidelines and has only started to come into the market in the last several weeks.”

Pyle notes that the retail investor has been encouraged by recent economic data and U.S. indexes topping old highs.

The problem is that they’re probably getting into the market at the wrong time.

“There’s nothing to say the market is going to pull back and we’re going into a protracted period of correction,” he said.

“But it is a market that is rich and a market that most professional investors would look at needing to blow some froth off the top in order to do some base building and ensure this rally can continue.”

One major headwind identified by analysts is a major effect from the settlement that prevented the U.S. from going over the so-called fiscal cliff at the end of December.

Arising from the agreement brokered between Democrats and Republicans was a two percentage point rise in payroll taxes from 4.2 per cent to 6.2 per cent.

“Two per cent is going to be about $120 billion out of wage earners’ pockets, and for someone typically making $35,000 a year that’s $700 of after-tax money — that is significant,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.

“And I just have to think that this is going to bleed into the consumer spending numbers, sales for the mass merchandisers and so on. We have had a great run here of late and I do think, in the short term, that we’re probably going to have a catalyst or two and this could be one of them that causes some sober second thought and some retracement of what we’ve seen this year.”

Concern over the effect of the higher tax surfaced last week when the U.S. Federal Reserve reported that the U.S. economy racked up generally moderate or modest growth in January and February.

But it cautioned that many districts said consumers pulled back slightly elsewhere after seeing taxes rise and gas prices increase. Some also expressed concerns about federal spending cuts that started on March 1.

And early data on February retail sales showed Americans cut back on spending as they contended with the increase in payroll taxes.

Traders will be looking to the February U.S. government report on retail sales for further indications on how the tax is impacting consumers. Economists expect sales to have increased 0.5 per cent during the month.

The eurozone government debt crisis could also be on investor radar screens this week after Fitch Ratings Agency on Friday downgraded Italy’s credit rating to BBB-plus from A-minus. Fitch also warned of a further downgrade, citing the uncertainty created by February’s inconclusive elections.

Fitch said the failure to come up with a clear winner makes it “unlikely that a stable new government can be formed in the next few weeks,” thereby harming prospects of further reforms.

]]>https://www.macleans.ca/economy/business/investors-wonder-if-rally-on-markets-can-withstand-economic-headwinds/feed/1Dollar could see further declines in wake of Bank of Canada rate announcementhttps://www.macleans.ca/economy/business/dollar-could-see-further-declines-in-wake-of-bank-of-canada-rate-announcement/
https://www.macleans.ca/economy/business/dollar-could-see-further-declines-in-wake-of-bank-of-canada-rate-announcement/#commentsSun, 03 Mar 2013 11:52:05 +0000http://www2.macleans.ca/?p=356326TORONTO – The Canadian dollar could be under further pressure this week as traders look to see what the Bank of Canada signals about interest rates hikes and how job…

]]>TORONTO – The Canadian dollar could be under further pressure this week as traders look to see what the Bank of Canada signals about interest rates hikes and how job creation held up during February.

Currency and stock markets will also be looking to see how an automated series of steep U.S. government spending cuts is being implemented and what progress Italy is making in forming a new government following inconclusive results from an election last week.

The central bank makes its next announcement on interest rates on Wednesday.

No one expects the bank to change its key rate from one per cent but it could make subtle changes in the language of its statement about its interest rate intentions.

At its last meeting in late January, the bank indicated that interest rate hikes are likely further off than previously thought and lowered its economic estimates.

That was enough to push the loonie below parity with the greenback, where it has stayed ever since, falling to an eight-month low. And economists don’t expect it to rise above parity any time soon.

“We continue to look for the currency to work its way back toward parity eventually but I have no problems seeing it drop as low as 95 cents US in the next short while,” said Doug Porter, chief economist at BMO Capital Markets.

“There are a lot of negatives suddenly stacked up against the currency short term, which could persist for awhile yet.”

The central bank shaved three-tenths of a point off its projections for growth for both 2012 and 2013, to 1.9 per cent and 2.0 per cent respectively.

But that could be revised lower, given data released Friday showing fourth quarter growth came in at an annualized rate of 0.6 per cent, with growth actually contracting during December.

“I’m not pointing fingers here, it’s just the reality that they have been consistently optimistic and the economy has underperformed steadily and that’s been also true on the inflation front,” added Porter.

“I think there is certainly a reasonable argument to be made that they will change the language.”

The loonie has fallen by about three US cents since that last meeting, down 0.6 of a cent over the past week.

Continued low rates are one reason but the loonie has also fallen amid worries about the strength of the housing sector and the price differential between benchmark Brent crude and Western Canadian Select from the oilsands.

Traders have also been concerned about U.S. economic strength in view of automated, across the board U.S. government spending cuts of more than US$85 billion that were triggered Mar. 1.

The loonie has also been hit by weak December retail figures, tame inflation data for the end of the year, signs that the current account trade deficit remains at close to record levels and the latest indication of weak economic growth.

The other major piece of Canadian economic data comes out Friday, when the February jobs report is released.

“And of course the story there is that the Canadian jobs picture ended last year surprisingly strongly, and I think reality caught up with the job market a bit in January when we saw employment drop,” said Porter.

“I think there’s a chance we could see another weak report but I think the main story here is that the economy is going to struggle to turn out reasonable job gains through the first half of this year.”

Economists anticipate job creation for February to come in at 8,000 after a plunge of 22,000 positions during January, with the jobless rate edging up 0.1 of a point to 7.1 per cent.

The U.S. government’s employment report for February also comes out Friday. It is expected that the economy cranked out 155,000 jobs, roughly the same amount as January.

Meanwhile, North American stock markets ended last week with minor gains in the wake of better than expected U.S. readings on the manufacturing sector and consumer confidence.

The effects from the imposition of the so-called sequester will likely weigh on markets this coming week.

It’s a strange situation since the cuts date from an agreement to raise the U.S. government debt limit in the summer of 2011. The program was not meant to be activated. Rather, lawmakers were supposed to come together before the March 1 deadline to agree on a more considered method of cutting government spending.

“The impact on sentiment and like consumer confidence and business confidence is going to be greater than the actually financial impact or impact on GDP,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“It has a far greater bearing on sentiment because what it’s going to lead to is people getting laid off for a month, or a couple of weeks, or something. Like government employees not getting a paycheque. There’s a ripple effect.”

He says the outcome is likely that it means the economic recovery will continue to be weak.

It doesn’t mean the outlook is dire, it just means things will keep muddling along, grinding out those few yards.

The Asian heavyweight, Tokyo’s Nikkei 225 index was the rare loser as the yen strengthened against the U.S. dollar following several months of weakness that boosted exporters. The Nikkei fell 1.3 per cent to 11,253.97.

European markets stabilized after diving the day before on Italy’s indecisive election result. The FTSE 100 index of leading British companies was up 0.3 per cent to 6,292.06 and Germany’s DAX was up 0.1 per cent to 7,607.16. France’s CAC 40 rose 0.3 per cent to 3,634.03.

U.S. stocks were poised to move marginally higher. Dow futures were up 0.1 per cent at 13,873.00 and broader S&P 500 futures rose 0.1 per cent to 1,493.60.

U.S. economic indicators also gave Asian markets a lift. Home sales rose to the highest level in more than four years last month and American consumers showed confidence for the first time in three months in February.

“Asian markets held up well after U.S. stock markets showed little impact to Italy’s election results,” said Kwak Joong-bo, a Seoul-based analyst at Samsung Securities.

Yet stock market gains in Asia remained modest, showing that investors have not fully regained their appetite for risky assets ahead of looming automatic spending cuts due to start Friday in the U.S.

And with Italy emerging from elections on Tuesday with no clear winner, there are lingering uncertainties about the fate of deficit and debt reduction measures in one of Europe’s biggest economies.

The Italian election result drove markets in Europe markedly lower. If Italian parties fail to form a governing coalition, new elections would be required, causing more uncertainty and a leadership vacuum.

In currency markets, the euro was trading at $1.3090. The dollar weakened 0.5 per cent to 91.65 yen.

Benchmark crude for April delivery was up 37 cents to $93 a barrel in electronic trading on the New York Mercantile Exchange.

]]>Traders look to progress on avoiding huge U.S. spending cutshttps://www.macleans.ca/news/traders-look-to-progress-on-avoiding-huge-u-s-spending-cuts/
Sun, 17 Feb 2013 12:28:41 +0000http://www2.macleans.ca/?p=351680TORONTO – Gains could be hard to find on stock markets this week as traders wonder if the current rally on markets has run out of steam and look to…

]]>TORONTO – Gains could be hard to find on stock markets this week as traders wonder if the current rally on markets has run out of steam and look to a looming deadline for massive, automated government spending cuts to take place in the U.S. at the end of the month.

Traders will also take in reports from several of the top miners in the TSX resource sector.

The Toronto stock market finished lower last week, in large part because of earnings disappointments from the mining and oil groups.

Gold miners have been struggling with higher labour and material costs and oil companies have been dealing with a higher price differential between benchmark West Texas Intermediate crude and the Western Canadian select that comes from the oilsands.

The TSX fell 0.9 per cent while New York’s Dow industrials ended the week flat.

It’s a shortened trading week in Canada and the U.S., with the TSX closed Monday because of Ontario’s Family Day holiday and American markets shuttered for Presidents Day.

The year on North American markets started strongly after U.S. lawmakers reached a last-minute deal to avoid the “fiscal cliff” of sweeping tax hikes and spending cuts. The Dow industrials ran up about six per cent during January and the TSX about 2.3 per cent.

Those gains are largely intact but analysts wouldn’t be surprised to see the tone turn a lot more cautious as the end of month deadline nears for sequestration legislation, which would result in across the board budget cuts totalling just over US$85.3 billion.

It would cut a big chunk out of American economic growth, a worrisome prospect for an economy struggling to put in growth of two per cent.

“It hasn’t attracted that much attention on the widespread assumption that this will all be rectified in some fashion and hopefully there will be a meeting of the minds,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.

“I would not be surprised to see this ramp up in the consciousness of traders quite a bit. It just has not been on the radar screen interestingly.”

But even leaving the sequester issue aside, indexes are largely where they started the month, indicating that traders see no reason to drive prices higher. At the same, volatility indexes are very low.

Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont., observes that markets have stayed up while losing momentum and volatility measures low.

“One of the worrisome things about what we’re dealing with right now is whenever you get volatility in the market declining to where we are right now, very low, it sends a false signal to retail investors that it’s a riskless market,” he said.

“The retail investor is always last to the party. The big money is selling equity to the guys coming into the party last and that’s usually an indication that we’re probably going to roll over here and it’s the typical story. The retail investor is last to the party, buys high, suffers the pullback and misread the signals of the market.”

Meanwhile, it’s another busy week on the earnings front as companies from the mining, consumer and transportation sector post results.

On the economic front, the major Canadian reports of the week come out Friday.

Statistics Canada was expected to report that December retail sales fell 0.5 per cent with the biggest drag coming from weaker auto sales. The agency also comes out with the latest consumer price index for January. Economists looked for a rise in prices of 0.1 per cent for the month.

In the U.S., traders will take in January housing starts on Wednesday. And existing house sales come out Thursday.

“Housing data will be the feature with starts likely to retreat from an off-the chart jump the prior month,” said CIBC World Markets chief economist Avery Shenfeld.

“Existing home sales could also see a marginal slip but we still se a broad uptrend intact for the next few years.”

Investors will also look to the release of the minutes from the latest Federal Reserve meeting on interest rates. They will be scanned for any hints as to how long the Fed will carry on with its stimulus measures that involve printing money to buy up bonds.

“I don’t think we’ll find any,” said Pyle.

“The only thing we’re going to find are more people sitting at the table at these Fed meetings and getting antsy about the size of the balance sheet and the logic or lack thereof of continuing the current quantitative easing program.”

]]>Stock markets could be in for more gains following solid U.S. economic datahttps://www.macleans.ca/general/stock-markets-could-be-in-for-more-gains-following-solid-u-s-economic-data/
Sun, 03 Feb 2013 12:01:31 +0000http://www2.macleans.ca/?p=346146TORONTO – The rally on stock markets that propelled North American indexes higher during January could find further momentum this month in the wake of solid economic data from the…

]]>TORONTO – The rally on stock markets that propelled North American indexes higher during January could find further momentum this month in the wake of solid economic data from the U.S. at the end of last week.

And the Canadian dollar could find some lift if the employment report for January comes in better than expected.

The S&P/TSX composite was up a shade over two per cent in January while the Dow industrials jumped about 5.75 per cent as corporations delivered some better than expected earnings reports and U.S. politicians avoided the so-called “fiscal cliff” with a compromise on taxation and an extension of the debt limit. There were also signs that China’s economy is reviving.

Sentiment was further improved on Friday as the U.S. non-farm payrolls report said the American economy created 157,000 jobs in January. The number of jobs created in November and December was also significantly revised upward, with a total of 127,000 more jobs created than initially thought.

And the Institute for Supply Management said its index on manufacturing showed greater than expected expansion, coming in at 53.1 in January, up from 50.2 in December to the highest level since April.

A similar Canadian index also showed marginal improvement for the first time since October, rising one-tenth of a point to 50.5 last month.

Those reports helped take some of the sting out of other data that showed the U.S. economy contracted during the fourth quarter by 0.1 per cent.

The TSX lost some ground last week, down 0.36 per cent, partly because of selling pressure on BlackBerry, the company formerly known as Research In Motion Ltd., (TSX:RIM), after it rolled out its new BB10 product last Wednesday.

However, New York bounded higher and the Dow industrials gained 0.81 per cent, closing above the 14,000-mark for the first time since late 2007.

But there are some headwinds. A major one could turn out to be one of the less-publicized aspects of the agreement that saved the U.S. from going over the so-called fiscal cliff at the beginning of this year.

Part of the deal brokered between Republicans and Democrats called for top earners to pay more in taxes.

The deal also saw the re-imposition of higher Social Security payroll taxes that will take a big chunk of cash out of the pockets of U.S. consumers. The tax increased to 6.2 per cent from four per cent.

“That’s probably something in the order of $125 billion out of wage earners’ pockets,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.

“This is going to have an effect on consumer spending and in particular, consumer spending for the basics, the mass merchandisers, all sorts of things.”

For example, someone earning $35,000 would take a $700 hit, while someone earning $50,000 would have $1,000 less after tax money, and so on.

Gorman said the consequences of those higher taxes will show up as early as this week as U.S. retailers start to issue preliminary results for January sales.

Meanwhile, economists had expected Canadian hiring activity to be paused last month after blowing past expectations in December, but the economy created more than 31,000 jobs.

“We think employment growth will slow to just 5,000 in January and that will push up the jobless rate to 7.2 per cent,” said Benjamin Reitzes, senior economist at BMO Capital Markets, adding that the slowdown in the housing sector is partly responsible for the softening.

Hiring in the construction sector saw a big gain in December “and that’s not really consistent with what we’re seeing in housing. So as housing cools, I expect that sector to cool as well,” Reitzes said.

Elsewhere on the TSX, BlackBerry is expected to remain volatile after losing ground last week in the wake of the launch of its new BB10 product. The stock closed up slightly Friday after tumbling 17 per cent in the previous two sessions, partly on profit taking but also because availability has become an issue as U.S. customers won’t be able to get the BlackBerry Z10 until March, a month later than in Canada.

“And the U.S. is the biggest single market. So that is an issue at least in the short term,” said Gorman, observing that some analysts have cut back their anticipated sales in the coming quarter because of this.

“At the end of the day, it’s now about execution. They have a great device now. They have to get it into the hands of the users and make a buck.”

Traders will also be looking to earnings reports from big Canadian corporations this week.

Suncor (TSX:SU), Canada’s biggest integrated oil company, hands in results Tuesday. Analysts are calling for adjusted earnings of 76 cents per share on revenue of $9.5 billion. A year ago, the company posted results of 91 cents a share on revenue of $10.1 billion.

“Often, there’s a fair bit of volatility in some of the oilsands producers (and) it wouldn’t surprise me to see a little softness there,” added Gorman.

You can have issues associated with downtime for maintenance and so on which can make the earnings on a quarter to quarter basis a little volatile.”

]]>S&P 500 index closes above 1,500 for first time since start of Great Recessionhttps://www.macleans.ca/general/sp-500-index-closes-above-1500-for-first-time-since-start-of-great-recession/
Sat, 26 Jan 2013 01:46:30 +0000http://www2.macleans.ca/?p=342558NEW YORK, N.Y. – Passing another milestone on the nation’s long journey back from the Great Recession, the Standard and Poor’s 500 index closed above 1,500 for the first time…

]]>NEW YORK, N.Y. – Passing another milestone on the nation’s long journey back from the Great Recession, the Standard and Poor’s 500 index closed above 1,500 for the first time in more than five years Friday after a wave of good earnings reports.

It took scores of incremental gains, several stalled rallies and a few sickening falls, but the widely watched S&P, one of the broadest measures of the American stock market, finished at 1,502.96, up 8.14 points. The index had not closed above 1,500 since December 2007, the start of the worst economic downturn since the 1930s.

The news came on top of other hopeful signs that the economy is slowly recovering. Housing is rebounding. Companies are hiring again, albeit slowly, and their earnings, a big driver of stock prices, are at record levels.

“The bottom line is that corporate America is doing exceptionally well,” said Joe Tanious, a global market strategist at JPMorgan.

The breakthrough happened on an eighth straight daily gain for stocks, itself a remarkable performance. That is the longest winning streak since November 2004.

Stocks have surged this month, with the S&P advancing 5.4 per cent. It jumped at the start of the year when lawmakers reached a last-minute deal to avoid the “fiscal cliff.” Signs that Europe has avoided financial collapse also helped.

Stocks fell sharply during the Great Recession. By March 2009, the S&P was 57 per cent below its October 2007 peak, a harrowing plunge that scarred a generation of small investors and, some Wall Street experts believe, will keep them away from stocks for years to come.

Since that fall, the market has climbed sharply, though it has endured several big declines. In May 2010, a trading glitch set off a so-called flash crash that sent stocks plummeting. And in August 2011, stocks gyrated like a roller coaster for several days as fears mounted that the U.S. would default on its debts.

On Friday, stocks were helped by earnings from two big companies. Procter & Gamble, the world’s largest consumer products maker, rose $2.83 to $73.25 after reporting that its quarterly income more than doubled. P&G also raised its profit forecast for its full fiscal year. Starbucks climbed $2.24 to $56.81 after reporting a 13 per cent increase in profits.

The Dow Jones industrial average closed at 13,895.98, up 70.65 points. The Dow is up 6 per cent on the year.

The Nasdaq composite gained 19.33 points to 3,149.71.

The Dow is now just 268 points below its record high of 14,165, reached on Oct. 9, 2007, two month before the recession began. The Dow has more than doubled since its recession low of 6,547 on March 9, 2009.

The S&P 500 is 62 points shy of its record of 1,565, reached on the same day the Dow hit its peak. The S&P has also more than doubled from its low of 676, which happened on the same day the Dow bottomed out in 2009.

JPMorgan’s Tanious expects stocks to go even higher. He says corporate earnings should grow at about 5 per cent over the next year or two, and stock valuations will rise. Currently, the S&P 500 is trading at an average price-to-earnings ratio of 14, below an average of 15.1 for the last decade, according to FactSet data.

On Friday, Apple continued to decline, allowing Exxon Mobil to once again surpass the electronics giant as the world’s most valuable publicly traded company. Apple fell 2.4 per cent to $439.88, following a 12 per cent drop on Thursday, the biggest one-day percentage decline for the company since 2008, after Apple forecast slower sales. The stock is now 37 per cent below the record high of $702.10 it reached Sept. 19.

Apple first surpassed Exxon in market value in the summer of 2011, grabbing a title Exxon had held since 2005. The two traded places through that fall, until Apple surpassed Exxon in early 2012.

Not everyone on Wall Street thought the S&P milestone was worth celebrating. Some noted the stock market is more a reflection of how traders feel than a reflection of underlying fundamentals.

“It’s not a landmark that we really follow or that we really care about,” said Derrick Irwin, portfolio manager for Wells Fargo Advantage Funds. “Focusing on the benchmarks can end up shooting you in the foot, as we’ve seen.”

Some of the rise may also be due to investing stock market momentum. A rule of thumb is that when a stock price or an overall index gets tantalizingly close to a milestone, as the S&P has been for days now, it’s almost certain to cross that milestone, at least temporarily.

Still, Deutsche Bank analysts raised their year-end target for the index to 1,600 from 1,575.

Companies will be able to maintain their earnings even if lawmakers in Washington decide to implement wide-ranging spending cuts to narrow the budget deficit, the analysts said in a note sent to clients late Thursday.

The yield on the 10-year Treasury note, which moves inversely to its price, climbed 11 basis points to 1.95 per cent.

Among other stocks making big moves.

— Halliburton gained $1.91 to $39.72 after posting a loss that was smaller than analysts had expected. The oilfield-services company said fourth-quarter profits declined 26 per cent to $669 million on increasing pricing pressure in the North American market and one-time charges from the Deepwater Horizon disaster. Wall Street had expected worse.

— Hasbro fell $1.14 to $37.31 after the toy maker said its fourth-quarter revenue failed to meet expectations because of poor demand over the holidays. The company plans to cut about 10 per cent of its workforce and consolidate facilities to cut expenses.

— Green Mountain Coffee Roasters rose $2.53 to $46.31 after an analyst noted that sales of a competing coffee brewer introduced by Starbucks were getting off to a weak start.

]]>TORONTO – The Canadian dollar was slightly lower Thursday amid rising prices for oil and metals and data indicating a slower pace of foreign investment.

The loonie dipped 0.05 of a cent to 101.36 cents US.

Oil prices headed higher, building on Wednesday’s gain of almost $1 after the U.S. Energy Information Administration said crude supplies declined by one million barrels last week. Analysts polled by Platts expected a 2.5-million-barrel climb.

Prices were also supported by an attack on a natural gas plant deep in the Sahara desert in Algeria. Islamist militants are holding dozens of hostages.

The February crude contract on the New York Mercantile Exchange gained 55 cents to US$94.79 a barrel.

March copper in New York rose two cents to US$3.63 a pound while February bullion declined $6.90 to US$1,676.30 an ounce.

On the economic front, Statistics Canada reported that foreign investment in Canadian securities came in at $5.6 billion in November, which was the lowest amount since July. Foreign investment in the Canadian money market was $3.8 billion, led by federal Treasury bills.

The data was important as “foreign investment flows into Canada have been an important support for the Canadian dollar over the last year and are expected to continue,” said Scotia Capital chief currency strategist Camilla Sutton.

In the U.S., the Commerce Department said housing starts came in at a seasonally adjusted annual rate of 954,000 during December. It was the fastest pace since the summer of 2008. Last year finished as the best year for residential construction since the start of the housing crisis.

And the Labour Department reported that the number of Americans seeking unemployment aid fell to a five-year low last week.

]]>Stock markets look to U.S. earnings, Canadian business survey for directionhttps://www.macleans.ca/general/stock-markets-look-to-u-s-earnings-canadian-business-survey-for-direction/
Sun, 13 Jan 2013 12:10:54 +0000http://www2.macleans.ca/?p=336552TORONTO – Investors will have plenty to chew on this week as U.S. companies deliver their quarterly earnings reports alongside a business survey from Canada’s central bank that will reveal…

]]>TORONTO – Investors will have plenty to chew on this week as U.S. companies deliver their quarterly earnings reports alongside a business survey from Canada’s central bank that will reveal sentiment on the economy.

Those two factors will be in focus in the coming trading sessions, while a handful of other economic data will also provide direction.

The U.S. banking sector will take much of the attention as several big name financial institutions report their results, including U.S. Bancorp, Bank of America and American Express.

Also on the schedule are Intel, General Electric and Lennar Corp.

While the results will be watched by investors, many analysts will also be attuned to each company’s outlook for the coming year, said Bob Gorman, chief portfolio strategist at TD Waterhouse.

The U.S. economy is expected to show further signs of recovery, but the sentiment of leading businesses serves as a barometer for whether executives share the same confidence.

While the fiscal cliff deadline of massive tax hikes and spending cuts was averted Jan. 1, investors still have a host of issues to worry about — not the least of which is the prospect of more debates over unresolved longer-term U.S. budget issues.

The next battle will be over the debt ceiling, or how much the government is allowed to borrow.

Federal Reserve chairman Ben Bernanke will make a speech at the University of Michigan on Monday that could include more insight into the duration of the government’s existing bond purchase program.

A glimpse into Canadian business sentiment will be revealed Monday when the Bank of Canada releases its annual Business Outlook Survey, which was compiled in mid-December as the U.S. was enveloped in concerns about the pending fiscal cliff.

CIBC chief economist Avery Shenfeld said it is important to note that the outlook survey questions focus on whether the pace of growth will pick up, or slow down, in the coming 12 months compared with the past 12 months.

“Given how soft the latter proved to be, the bar for optimistic answers is set quite low,” he wrote in a note.

“Manufacturing shipments will show a strong rebound, but only enough to recoup the prior month’s dip.”

Also on the calendar in Canada is the MLS Home Price Index for December, due Tuesday. The data is expected to show a 17 per cent decline over the same time a year earlier, while average home prices will hold up.

In the U.S., consensus expectations for December retail sales on Tuesday suggest that the holiday shopping season was only slightly better than the previous year. Estimates target sales to remain relatively flat as vehicle sales backed off the five-year highs reached in November.

“Retailers reported a mixed bag of results for the holiday season, resorting to more aggressive discounting as December unfolded to keep sales momentum going,” said Michael Gregory, senior economist at BMO Capital Markets.

The U.S. housing recovery is expected to show further recovery when data on housing starts for December is released Thursday. Consensus expectations are for an increase of 890,000 starts on an annualized basis.

]]>U.S. corporate earnings to take centre stage on stock markets this weekhttps://www.macleans.ca/general/u-s-corporate-earnings-to-take-centre-stage-on-stock-markets-this-week/
https://www.macleans.ca/general/u-s-corporate-earnings-to-take-centre-stage-on-stock-markets-this-week/#commentsSun, 06 Jan 2013 13:16:13 +0000http://www2.macleans.ca/?p=333987TORONTO – The Toronto stock market could be in for further gains next week as investors shift their focus from political wrangling in Washington to the start of a slew…

]]>TORONTO – The Toronto stock market could be in for further gains next week as investors shift their focus from political wrangling in Washington to the start of a slew of fourth-quarter earnings reports.

The Toronto market ended last week 1.82 per cent higher while New York’s Dow industrials plowed ahead 3.84 per cent after U.S. lawmakers reached an 11th hour deal to avert big tax hikes and spending cuts that were due to kick in at the start of the year.

However, traders worry that U.S. budget talks could pose a threat to risk appetite for months.

The reporting season kicks off after the close Tuesday when resource giant Alcoa Inc. hands in results that are expected to be an improvement from a year ago.

“With the earnings season, I think most people expect it to be fairly decent,” said Andrew Pyle, investment adviser with ScotiaMcLeod in Peterborough, Ont.

“The economy didn’t fall apart in the fourth quarter of last year, in fact there were signs of re-acceleration in some sectors. I think most people are setting reasonable expectations because there are sectors where we will still see pressure, in the materials sector for example where Alcoa is going to launch from.”

Alcoa’s earnings are eagerly anticipated since the aluminum company’s products are used in a wide variety of industries, everything from cars to appliances.

It’s also viewed as a good indication of where the overall resource sector is at, an important consideration for a market like the TSX that is heavily weighted in favour of commodity-based companies.

Analysts expect Alcoa to turn in earnings of six cents a share, a big improvement from the three cent a share loss the company posted a year ago and the 13-cent a share loss from the third quarter.

The company has been pressured by a global manufacturing slowdown, and in particular by falling demand from China last year.

Aluminum prices were weak during the fourth quarter, losing about about two per cent on the London Metal Exchange.

Those lower prices were mentioned by ratings agency Moody’s Investor Service late last month when it placed Alcoa’s debt on review for a possible downgrade. It also cited the weak U.S. economy, the debt crisis in Europe, and slower growth in China.

Beyond earnings, seasonal factors will likely play a role in market sentiment this week.

“We’re partway through the period of seasonal strength,” said John Johnston, chief strategist at Davis Rea Ltd.

“The intermediate cycle turned up in late November, early December and it probably has a couple of months to run on the upside.”

At the same time, there is a feeling that while the fiscal cliff scenario was narrowly avoided last week, it won’t be long before other U.S. fiscal challenges pop up to test investor patience.

For example, lawmakers will next be engaged in negotiations to hike the U.S. debt limit in early March.

“And that is unfortunate,” added Pyle.

“I think most individuals will view what we’ve just been through (last week) kind of it. That was a hurdle we had to cross, we’ve crossed and now it makes for smooth sailing where in fact, it’s not clear sailing, we still have other hurdles that you have to cross and that’s only one of them.”

The U.S. Federal Reserve cast a shadow over markets last week that could carry on into this week.

Minutes from the Fed’s policy meeting last month showed while policy-makers expressed broad support for the Fed’s plan to buy bonds to support the U.S. economy, there was a split over how long to continue the purchases.

Some of its voting members thought they would continue through this year, while others thought they should be slowed or stopped before the end of 2013 amid concerns that the continued bond purchases, known as quantitative easing, would destabilize the economy.

Meanwhile, it’s a light week for economic data this week.

The major Canadian reports are December housing starts which come out on Wednesday. Canada Mortgage and Housing Corp. is expected to report that starts came in at an annual rate of 195,000, down 0.6 per cent from the previous month as the feverish housing sector continues to cool.

And on Friday, Statistics Canada releases the Merchandise Trade Balance for November. Economists expect the agency to report that falling commodity prices helped push the balance to a a deficit of $700 million, up from $170 million in October.

]]>https://www.macleans.ca/general/u-s-corporate-earnings-to-take-centre-stage-on-stock-markets-this-week/feed/1With hours to go before fiscal cliff is breached, markets relatively calmhttps://www.macleans.ca/general/with-hours-to-go-before-fiscal-cliff-is-breached-markets-relatively-calm/
Mon, 31 Dec 2012 13:22:52 +0000http://www2.macleans.ca/?p=332366LONDON – Markets appeared Monday to be taking in stride the prospect that U.S. politicians will fail to agree a budget deal in time to avoid automatic tax increases and…

]]>LONDON – Markets appeared Monday to be taking in stride the prospect that U.S. politicians will fail to agree a budget deal in time to avoid automatic tax increases and spending cuts that many economists think could tilt the world’s largest economy back into recession.

With just hours to go before the U.S. falls off the so-called “fiscal cliff,” Republicans and Democrats remained divided over tax and spend, raising the prospect that markets will start 2013 without a clear idea of America’s budget policy. The main sticking point appears to be what level of taxes are imposed on higher incomes.

Discussions in the Senate broke off Sunday night without an agreement. The Senators will return to their offices Monday to try and hammer out a deal before the deadline.

“With the gulf between both parties still wide and the desire to protect their supporters’ key interests so ingrained, it is difficult to see how both sides can compromise enough to agree a deal at this point,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

However, it’s not the first time that budget discussions in the U.S. have gone down to the wire, and investors remain confident that some sort of deal will be reached, if not Monday then in the coming days or weeks. As a result, they think that the potential damage wrought by higher taxes and spending cuts will be limited.

In addition, a backup proposal that would address only a few issues is expected to be presented by Senate Majority Leader Harry Reid, a Democrat, if a bipartisan deal is not reached.

The prospect of counter-measures to offset the “fiscal cliff” impact helps explain why markets were fairly calm in Europe and Asia, and Wall Street was poised to open higher.

In Europe, the FTSE 100 index of leading British shares was down 0.4 per cent at 5,901 but the CAC-40 in France was 0.4 per cent higher at 3,633. Most European indexes are only trading for half of the day ahead of the New Year break, while others including Germany’s DAX were closed.

U.S. stocks were poised for gains at the open, with Dow futures up 0.2 per cent and the broader S&P 500 futures 0.4 per cent higher, even though in theory, the U.S. faces around $671 billion of tax increases and spending cuts over the coming months, equivalent to the sort of fiscal tightening taking place in highly indebted Europe.

Clearly, their full imposition would hobble an economy that has shown some signs of late of a more sustainable economic recovery.

Some economists predict the tax-and-spending effects of the “fiscal cliff” could eventually throw the U.S. economy back into recession — although if the deadline passes, politicians still have a few weeks to keep the tax hikes and spending cuts at bay by repealing them retroactively once a deal is reached.

“It is likely that many of the fiscal cliff measures allow a certain amount of room within which the government can introduce measures to refrain from any tax increases,” said Joshua Mahony, an analyst at Alpari.

Still, the failure to adhere to the deadline following weeks of squabbling and procrastination could be view negatively by the major credit rating agencies and weigh on investor confidence going into 2013.

“I think the market reaction to that will be very negative. This means the U.S. will never be able to bring its house in order. And the deficit will continue to accumulate,” said Francis Lun, managing director of Lyncean Holdings in Hong Kong. “No meaningful reform and no solution in sight. You can throw confidence out of the window.”

Earlier in Asia, the picture was fairly subdued in those markets that were open — among others, markets in Japan and South Korea were closed for the New Year’s holidays.

Hong Kong’s Hang Seng, trading for a half-day, closed marginally lower at 22,656.92, while mainland Chinese stocks rose after a private survey showed the country’s manufacturing growth at its strongest level in 18 months in December. Australia’s S&P/ASX 200 fell 0.5 per cent to close at 4,648.90.

There was also a fairly calm atmosphere in other financial markets, with the euro down just 0.2 per cent at $1.3191 and the price of benchmark New York crude down 11 cents at $90.69 a barrel.

]]>U.S. fiscal cliff worries will weigh on stock markets as 2012 trading winds downhttps://www.macleans.ca/general/u-s-fiscal-cliff-worries-will-weigh-on-stock-markets-as-2012-trading-winds-down/
https://www.macleans.ca/general/u-s-fiscal-cliff-worries-will-weigh-on-stock-markets-as-2012-trading-winds-down/#commentsSun, 30 Dec 2012 13:36:48 +0000http://www2.macleans.ca/?p=332319TORONTO – A steady drip of losses is expected on the Toronto stock market as a new trading year is about to open amid growing uncertainty about how U.S. political…

]]>TORONTO – A steady drip of losses is expected on the Toronto stock market as a new trading year is about to open amid growing uncertainty about how U.S. political leaders will deal with a deep partisan divide over budget deficits.

Traders have been reluctant to make big commitments on the markets as the end of December approached and with that, the fiscal cliff — the automatic imposition of big spending cuts and significant tax increases set to take effect Jan. 1.

The worry is that with the U.S. economy already weak, the double-whammy of those measures could easily tip the country back into recession, taking other economies along with it.

Investors will also take in data showing that the U.S. economy continued to improve in December despite the uncertainty surrounding the potential fiscal crisis.

“The economy is going along in the three per cent clip now in the U.S. so it’s pretty solid,” said John Stephenson, portfolio manager at First Asset Funds Inc.

“And the data has been improving over the last couple of quarters so I think, in general, things are looking better but the cliff is a worry and this indecision again heightens the political risk that now marks the U.S. economy.”

The latest readings on U.S. job creation, new home sales and the American manufacturing and service sectors are all being released in this week.

And in Canada, the December employment report comes out at the end of the week.

Fiscal cliff concerns left the TSX losing some ground last week, down 69.58 points or 0.56 per cent while the Dow industrials fell 1.9 per cent.

The latest dip left the TSX up barely three per cent year to date.

Stock indexes held up in December with many traders convinced that Democrats and Republicans would reach a deal on raising more income and cutting spending, although likely at the last minute.

But pessimism increased as the Dec. 31 deadline approached and the two sides appeared as deadlocked as ever.

There was particular disappointment at the end of last week as a meeting Friday afternoon between President Barack Obama and congressional leaders yielded no new offers from either side.

And that means the collective patience of the markets could be wearing thin.

“If they can’t come to an agreement in three weeks time, or a month’s time, then I think all bets are off and the market heads substantially lower,” said Stephenson.

On the economic front, the major report of the week comes out Friday when the U.S. Labour Department is forecast to report that job growth came in at 140,000 in December, down slightly from November’s 146,000 read.

In Canada, Statistics Canada releases its December employment survey. Economists expect the agency to report that the economy cranked out a modest 5,000 jobs, a not surprising pullback after having generated more than 50,000 jobs in two of the previous three months.

Economists expect that data out Thursday will show the housing recovery continues in the U.S. New home sales are expected to rise to an annual rate of 380,000 units in November from 368,000 in October, a level not seen in at least three years.

The Institute for Supply Management is expected to report Wednesday that the manufacturing sector crawled out of contraction territory — but just barely. The index is expected to hit 50, the saw-off point between expansion and shrinkage.

And the ISM’s non-manufacturing index, out Friday, is expected to show growing expansion, rising to 55 in December from 54.7 in November.

]]>https://www.macleans.ca/general/u-s-fiscal-cliff-worries-will-weigh-on-stock-markets-as-2012-trading-winds-down/feed/1Canadian dollar lower, traders avoid risk on growing fiscal cliff worrieshttps://www.macleans.ca/general/canadian-dollar-lower-traders-avoid-risk-on-growing-fiscal-cliff-worries/
Fri, 28 Dec 2012 14:03:07 +0000http://www2.macleans.ca/?p=332062TORONTO – The Canadian dollar was lower Friday amid doubts about whether the U.S. can avoid going over the so-called fiscal cliff in a matter of days, a development that…

]]>TORONTO – The Canadian dollar was lower Friday amid doubts about whether the U.S. can avoid going over the so-called fiscal cliff in a matter of days, a development that could put the United States on course for another recession.

The loonie was down 0.06 of a cent to a one-month low of 100.45 cents US.

The fiscal cliff scenario involves the automatic imposition of huge spending cuts and significant tax increases due to take effect at the beginning of the year. With the U.S. recovery already weak, economists worry that the American and other economies could be dragged down if the measures are allowed to persist.

Congressional leaders and President Barack Obama are expected to meet later Friday at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Commodities were mixed with February crude on the New York Mercantile Exchange up four cents to US$90.91 a barrel.

March copper dipped a penny to US$3.59 a pound while February gold declined $3.60 to US$1,660.10 an ounce.

Markets hit their worst levels of the session after Senate Majority Leader Harry Reid said the U.S. government appears headed over the fiscal cliff because of a lack of progress in negotiations between Republicans who control the House of Representatives and Democrats who control the Senate and White House.

But indexes recovered most of the losses late in the day on word that the House will be back in session Sunday evening. It is unclear what legislation the House might consider Sunday, since Speaker John Boehner is publicly insisting that the Senate must make the next move to avert the cliff.

“At the end of the day, this prevailing will-they-or-won’t they in Washington is causing a dip,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

“But it’s tough to read too much into anything given that volumes are exceptionally low. All the players aren’t in the game so to speak.”

The Dow Jones industrials lost 18.28 points to 13,096.31, as data showed fiscal cliff worries are spreading to consumers.

The U.S. Conference Board said that its consumer confidence index fell this month to 65.1, down from 71.5 in November, the second straight decline and the lowest level since August.

The survey showed consumers were slightly more optimistic about current business conditions and hiring, but their outlook for the next six months deteriorated to its lowest level since 2011

Other data showed that the average number of Americans seeking unemployment benefits over the past month fell last week to the lowest level since March 2008.

The U.S. Labour Department said Thursday that weekly applications dropped 12,000 to a seasonally adjusted 350,000 in the week ended Dec. 22. The four-week average, a less volatile measure, fell to a nearly five-year low of 356,750.

On the Toronto market, losses were led by a 0.5 per cent decline in the financials subgroup as Sun Life Financial (TSX:SLF) moved down 26 cents to $26.35. TD Bank (TSX:TD) declined 72 cents to $83.27.

Commodities were mixed with February bullion up $3 to US$1,663.70 an ounce. The gold sector led advancers, up about 1.8 per cent with Barrick Gold Corp. (TSX:ABX) ahead 73 cents to C$34.24 while Goldcorp Inc. (TSX:G) advanced 46 cents to $35.98.

Support also came from the base metals sector, which rose 0.75 per cent while March copper was unchanged at US$3.60 a pound after rising five cents Wednesday. The gain, the largest in four weeks, came after workers rejected a wage proposal at BHP Billiton’s Escondida mine in Chile. Turquoise Hill Resources (TSX:TRQ) gained 21 cents to C$7.26.

The February crude oil contract on the New York Mercantile Exchange edged down 11 cents to US$90.87 a barrel. The energy sector was slightly higher while Canadian Natural Resources (TSX:CNQ) fell 40 cents to C$28.49 and Niko Resources (TSX:NKO) jumped $1.05 to $10.50.

A major TSX loser was Poseidon Concepts Corp. (TSX:PSN), which plunged more than 50 per cent after the oilfield service company suspended its dividend, replaced its CEO and initiated a board review of the management and business processes. Poseidon shares were down $1.83 at $1.48 after the company said it has established a special committee of the board to review the recent writeoff of certain accounts owing to it.

The tech sector also provided lift with Research In Motion Ltd. (TSX:RIM) up $1.20 or 11.43 per cent to $11.70, mirroring an 11 per cent gain on U.S. markets on Wednesday. RIM stock plunged about 25 per cent last week as analysts raised concerns about less revenue from the lucrative service fees charged by the company to use its secure network. The stock had been on a roll earlier in December on rising optimism about the new BlackBerry 10 lineup, which is being launched at the end of January.

Elsewhere on the corporate front, Bombardier Aerospace has received a new order for six Learjet 75 business jets. Bombardier shares added a penny to $3.76.

]]>Loonie moves higher ahead of Christmas, deadline for U.S. to avoid fiscal cliffhttps://www.macleans.ca/general/loonie-moves-higher-ahead-of-christmas-deadline-for-u-s-to-avoid-fiscal-cliff/
Mon, 24 Dec 2012 17:59:09 +0000http://www2.macleans.ca/?p=331574TORONTO – The Canadian dollar moved higher on Monday as financial markets prepared for the Christmas holiday and weighed the U.S. federal budget negotiations that have stalled.
The loonie closed…

]]>TORONTO – The Canadian dollar moved higher on Monday as financial markets prepared for the Christmas holiday and weighed the U.S. federal budget negotiations that have stalled.

The loonie closed at 100.88 cents U.S., up 0.22 of a cent in a shortened trading session that ended at noon ET.

Key U.S. lawmakers were predicting that much of their holiday season will be spent in Washington, D.C., as they seek to bridge a gap between the Republican-dominated House of Representatives and the White House.

A deal must be reached if the United States is to avoid going over the so-called fiscal cliff, which would involve the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession.

President Barack Obama said Friday that he is “ready and willing” to get a big package done to deal with the fiscal cliff, adding there’s no reason not to protect middle-class Americans from tax increases.

In commodities, the January crude oil contract on the New York Mercantile Exchange slid nine cents to US$88.57 a barrel.

March copper was down 1.8 cents at US$3.55 a pound. February gold bullion dropped 40 cents to US$1,659.70 an ounce.

]]>Markets flat in holiday-thinned trading though concerns over U.S. budget remainhttps://www.macleans.ca/general/markets-flat-in-holiday-thinned-trading-though-concerns-over-u-s-budget-remain/
Mon, 24 Dec 2012 12:11:25 +0000http://www2.macleans.ca/?p=331552LONDON – Financial markets were largely steady in holiday-thinned trading Monday though concerns remain over the progress of U.S. budget discussions and the future of the economic reform program in…

]]>LONDON – Financial markets were largely steady in holiday-thinned trading Monday though concerns remain over the progress of U.S. budget discussions and the future of the economic reform program in Italy.

For weeks, the discussions between the White House and Congress over a budget deal have been the main driver in markets. If a deal isn’t agreed to by the start of 2013, automatic spending cuts and tax increases worth hundreds of billions of dollars will be imposed — which many economists think could push the U.S. economy back into recession.

The prevailing view has been that a deal would be agreed to in time but as the deadline nears there are growing doubts over whether the U.S. will be able to avoid the so-called “fiscal cliff.”

“The reality is given that the U.S. government is now closed for the holiday break the likelihood of anything other than soothing procrastination is highly unlikely much before the Jan. 1 deadline,” said Michael Hewson, senior market analyst at CMC Markets.

Doubts over the progress of discussions prompted a fairly sizeable sell-off last Friday though many analysts still think there will be agreement on some sort of short-term measures.

“Even if this stopgap measure is implemented it may not be enough to prevent unwanted volatility in equity markets going into 2013 as investors try and assess the adverse impact on the U.S. economy,” said Neil MacKinnon, global macro strategist at VTB Capital.

Most markets across Europe are only open for half a day and will only re-open again on Thursday. German markets are closed for Christmas Eve.

With around an hour of trading to go, Britain’s FTSE 100 index of leading British shares was up 0.2 per cent at 5,952 while the CAC-40 in France was down an equivalent rate at 3,655.

Wall Street was poised for more marked falls at the open in what will also be a holiday-shortened trading day — both Dow futures and the broader S&P 500 futures were down 0.4 per cent.

As well as monitoring developments in the U.S. over the coming days, investors will be keeping a close watch on what’s going on in Italy ahead of a general election in February.

Over the weekend, outgoing Prime Minister Mario Monti indicated that he would be willing to return to the role if pro-reform parties back him.

Over the past year or so, Monti and his technocratic government have won plaudits in the markets for their economic reforms and efforts to get a grip on the country’s borrowing. Italy has the second-highest debt burden among the 17 EU countries that use the euro. Only Greece’s is higher.

Earlier in Asia, Hong Kong’s Hang Seng, closed up 0.1 per cent at 22,531.51 while South Korea’s Kospi rose less than 0.1 per cent to 1,981.82. Japanese markets were closed for the Emperor’s birthday holiday.

Other financial markets were subdued too. In the currency markets, the euro was up 0.2 per cent at $1.3227 while the benchmark New York oil price was down 3 cents at $88.63 a barrel.

]]>TORONTO – Holiday cheer will be swapped with a dose of fear after traders return from a holiday break this week as developments over the “fiscal cliff” negotiations keep the attention of investors, and will likely lead to erratic movements in stock markets.

The shortened trading week, and traditionally low volume levels around the Christmas holiday, will likely accentuate any market shifts related to developments in the stalled U.S. federal budget talks. Congress will reconvene on Thursday.

But before then, trading will likely remain calm in the shortened session leading up to Christmas Eve.

The Toronto Stock Exchange closes early on Monday at 1:30 p.m. ET, while New York markets end the session at 1 p.m. ET.

North American markets will remain closed for the Christmas Day holiday, and the TSX will also be closed on Wednesday for Boxing Day.

On Thursday, traders will return their attention to the ticking clock leading up to the year-end deadline.

Last Friday, stocks fell sharply after House Republicans called off a vote on tax rates and left federal budget talks in disarray 10 days before sweeping tax increases and government spending cuts are scheduled to take effect.

President Barack Obama said later Friday that he is “ready and willing” to get a big package done to deal with the fiscal cliff, adding there’s no reason not to protect middle-class Americans from tax increases.

Obama says he spoke Friday with House Speaker John Boehner and met with Senate Majority Leader Harry Reid. He says Congress should pass a plan to extend tax breaks for the middle class and extend unemployment benefits.

Obama says no one can get 100 per cent of what they want and there are “real consequences” to how they deal with the across-the-board tax increases and steep spending cuts scheduled to kick in Jan. 1. Economists fear the combination could deliver a blow to the U.S. economy.

A deal must be reached to avoid going over the so-called fiscal cliff,’ which would involve the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession and depress economies around the world.

“Legislators are under increasing pressure to act quickly to prevent the sort of acute market volatility seen before (the) agreement on TARP and a debt ceiling deal 16 months ago,” said CIBC World Markets senior economist Peter Buchanan.

Investors will also be squaring away their tax books for the year. Monday marks the last day for tax-loss selling for Canadian taxpayers selling equities through domestic accounts. The deadline for U.S. securities tax loss sales is Wednesday.

“Once you get past those tax-loss selling deadlines, the markets have to look ahead, because there’s nothing else you can lock in for 2012,” said Gareth Watson, vice-president of investment management and research at Richardson GMP Ltd.

“Once we get to Thursday and Friday people will start focusing way more on 2013. That’s probably when the Washington news and noise will have even greater influence and that’s probably where the volatility picks up again.”

In the U.S., pending home sales figures are due on Thursday with expectations for home prices to show further appreciation.

]]>Asian stock markets rise after EU, IMF agree on a deal to help Greece deal with its debthttps://www.macleans.ca/general/asian-stock-markets-rise-after-eu-imf-agree-on-a-deal-to-help-greece-deal-with-its-debt/
Tue, 27 Nov 2012 03:14:03 +0000http://www2.macleans.ca/?p=319824BANGKOK – Asian stock markets rose Tuesday after talks over Greece’s financial crisis ended with an agreement on how to reduce its debt load, paving the way for the cash-strapped…

]]>BANGKOK – Asian stock markets rose Tuesday after talks over Greece’s financial crisis ended with an agreement on how to reduce its debt load, paving the way for the cash-strapped country to receive the next installment of a bailout loan.

Finance ministers of the 17 countries that use the euro and representatives of the International Monetary Fund reached an agreement late Monday that will enable Athens to receive €34.4 billion ($40.8 billion) immediately and three additional payments in early 2013.

Greece has endured five years of recession and a 25 per cent unemployment rate. It has been locked out of the international long-term debt market by exceptionally high interest rates demanded for its bonds since 2010, and has been relying on funds from rescue loans by other euro countries and the IMF.

Wall Street stocks were mixed on the first full day of trading after the Thanksgiving holiday, with no resolution on the immediate horizon to the “fiscal cliff” of automatic tax increases and steep spending cuts that take effect in January unless President Barack Obama and Congress reach a budget agreement.

The Dow Jones industrial average fell 0.3 per cent to close at 12,967.37. The Standard & Poor’s 500 index fell 0.2 per cent to 1,406.29. The Nasdaq composite rose 0.3 per cent to 2,976.78.

Benchmark oil for January delivery was up 25 cents to $87.99 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 54 cents to close at $87.74 on the Nymex on Monday.

In currencies, the euro rose to $1.2985 from $1.2963 late Monday in New York. The dollar fell to 81.97 yen from 82.18 yen.

]]>Fears of U.S. driving over fiscal cliff to set the pace on marketshttps://www.macleans.ca/general/fears-of-u-s-driving-over-fiscal-cliff-to-set-the-pace/
https://www.macleans.ca/general/fears-of-u-s-driving-over-fiscal-cliff-to-set-the-pace/#commentsSun, 18 Nov 2012 13:44:31 +0000http://www2.macleans.ca/?p=316071TORONTO – The looming U.S. fiscal cliff will weigh on markets again this week amid uncertainty that politicians can come together to defuse a potential crisis that threatens to send…

]]>TORONTO – The looming U.S. fiscal cliff will weigh on markets again this week amid uncertainty that politicians can come together to defuse a potential crisis that threatens to send the U.S. into recession and derail a fragile global economic recovery.

“If there is no indication that a compromise is going to be reached, and that some type of resolution is going to be reached, equity markets as we are witnessing, will pass verdict,” said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.

Investors will also be anxious to see if shoppers’ confidence has been shaken as the American retail sector launches the start of the holiday shopping season with many stores opening their doors Thanksgiving night on Thursday.

The TSX has tumbled 3.9 per cent since the election Nov. 6 as worries about a sudden slowing of economic growth would be bad news for a resource heavy market like Toronto’s, since a lessening of demand for oil and metals would put pressure on mining and energy stocks.

The Dow industrial average has fallen five per cent as investors worry about higher dividend and capital gains taxes.

The election left the Washington status quo largely in effect — the Democrats control the White House and Senate while Republicans continue to control the House of Representatives.

The outcome left traders lacking confidence that lawmakers can agree on a budget deficit cutting compromise and defuse the expiration of Bush-era tax cuts and the automatic imposition of huge spending cuts. Many economists believe the combination would send the U.S. back into recession.

There was some comfort at the end of the week as congressional leaders expressed confidence a deal could be reached following a Friday meeting with president Barack Obama.

And while many think that American politicians will get a compromise together out of sheer self-survival instincts, it’s not surprising that investors aren’t waiting around until Dec. 31 to protect themselves, particularly in the U.S. where much higher dividend and capital gains tax hikes are a real possibility.

“While politicians in Washington may tend to act stupid at times, they will not be so insane to allow this fiscal cliff to materialize and will likely do something sooner than later so that doesn’t happen,” added Pyle.

“But that doesn’t mean that investors are not still sensitive to hints or indications that may not happen.”

And while investor confidence has been shaken by the looming deadline, traders will be anxious to see if consumers are feeling a sense of alarm at the start of the holiday retail season, which traditionally kicks into gear the day after Thanksgiving. It’s referred to as Black Friday as it, ideally, marks the start of a period when retailers begin to turn a profit, or move into the black.

Some analysts point out that a widely-watched gauge, the University of Michigan’s consumer sentiment index released Nov. 9, showed that Americans feel better about the state of the U.S. economy than at any point in the last five years.

But Pyle said it’s very possible the unease is affecting consumers who are facing big tax hikes in 2013 unless the fiscal cliff issue is dealt with.

“We have lost a key element of consumer confidence with this market decline,” he said.

“And so now retail business owners in the US are not only thinking about their own fiscal future under the fiscal cliff scenarios, now (they’re) thinking, I may not get many customers in the store on Black Friday because the market has fallen back so much and we could see it reflected in another somewhat dismal retail sales number for November.”

On the economic front, traders will look to the September reading on Canadian retail sales. Economists looked for Statistics Canada to report sales rose 0.5 per cent during the month following a 0.3 per cent rise in August.

In the U.S., traders hope to see continued signs of an improving housing sector amid lower levels of foreclosures and modest price increases.

Housing starts for October are reckoned to come in at an annualized rate of 840,000, down from 872,000 in September.

“Compounding the natural volatility of the figures, stormy weather towards the end of the month may have restricted starts along the populous east coast,” said CIBC economist Andrew Grantham.

]]>https://www.macleans.ca/general/fears-of-u-s-driving-over-fiscal-cliff-to-set-the-pace/feed/1Stocks in for losses on worries political gridlock will derail fiscal cliff dealhttps://www.macleans.ca/general/stocks-in-for-losses-on-worries-political-gridlock-will-derail-fiscal-cliff-deal/
https://www.macleans.ca/general/stocks-in-for-losses-on-worries-political-gridlock-will-derail-fiscal-cliff-deal/#commentsSun, 11 Nov 2012 12:31:01 +0000http://www2.macleans.ca/?p=313687TORONTO - Stock markets look set for a steady drip of losses in the near future as traders worry that American lawmakers won't be able to avoid a series of damaging spending cuts and tax increases coming into effect at the beginning of next year.

]]>TORONTO – Stock markets look set for a steady drip of losses in the near future as traders worry that American lawmakers won’t be able to avoid a series of damaging spending cuts and tax increases coming into effect at the beginning of next year.

Worries about the impending fiscal cliff sent North American markets lower last week after traders immediately turned their attention from a fierce election campaign that essentially left the American political landscape unchanged to the looming deadline.

The TSX ended the week down 183.61 points or 1.48 per cent while the Dow fell 277.77 points or 2.12 per cent.

The fiscal cliff label refers to a string of tax increases and steep spending cuts aimed at cutting the deficit which are set to take effect at the first of the year. If they are allowed to take full effect, the cuts and tax increases will total about at least half a trillion dollars and take a big chunk out of GDP, in 2013. Failure to come up with a compromise would likely tip the U.S. back into recession and drag down other economies with it.

Bank of Canada governor Mark Carney says the fiscal cliff is the most imminent threat facing the Canadian economy.

Traders found little comfort from an announcement by President Barack Obama Friday that he is inviting congressional and business leaders to a meeting next for talks aimed at finding a compromise.

But he made it clear that spending cuts must be combined with new revenue, adding he would not accept any approach that isn’t balanced and doesn’t include the wealthy paying more taxes.

Losses were deeper on U.S. markets as traders weighed the odds of much higher tax rates on dividends and capital gains.

“People woke up Wednesday morning and those who have meaningful investment positions said OK, nothing has really changed in the government so it looks like tax rates will be going up, one way or another,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“And you have to consider that the tax rate on capital gains in the U.S. is 15 per cent (the same as the tax rate on dividends). And the Democrats are suggesting the tax rates should be closer to the rate that’s paid on regular income and interest income and so on.”

He pointed out that the U.S. market has come a long way since hitting bottom in March, 2009, leaving many investors with strong gains on their portfolios.

“And they’re going to say, maybe I’ll take those gains now at the 15 per cent tax rate rather than risk taking them next year at whatever the higher rate is. And people who bought these stocks for the dividends are suddenly saying, maybe they’re not quite as attractive,” he said.

A major reason for the lack of confidence in American lawmakers is that traders recall the fierce infighting that went on during the debate on raising the U.S. debt limit during the summer of 2011. The raucous debate pressured financial markets around the world.

It’s not just Americans who are more inclined to sell these days. Canadians are also finding that the U.S. isn’t as attractive as it was earlier this year.

“In our portfolios, I’ve been very bullish on the U.S. and up to now, and I still think longer-term, it will do well,” said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

“But for the next three months now, I’m taking off a little bit of my bet on the U.S., hedging it by putting some (money) in Canada because I think if the fiscal cliff doesn’t get resolved, I don’t want to be significantly overweight. If it does, I can get back into my position right away.”

At the same time, market analysts make clear that they can’t believe there won’t be an agreement, even it comes at a minute before midnight.

“I have to believe that common sense is going to prevail and there will be, both sides will say, look, we do have to compromise here, let’s find a way and they’ll do something because they both realize how they’re holding the economy back,” said Jim Muir, director at Fraser Mackenzie.

]]>https://www.macleans.ca/general/stocks-in-for-losses-on-worries-political-gridlock-will-derail-fiscal-cliff-deal/feed/1Busy week for traders amid interest rate decisions, U.S. growth data, earningshttps://www.macleans.ca/general/busy-week-for-traders-amid-interest-rate-decisions-u-s-growth-data-earnings/
Sun, 21 Oct 2012 11:32:23 +0000http://www2.macleans.ca/?p=305505TORONTO - Investors have plenty to sift through this week with traders looking to central bank intentions for interest rates, a raft of quarterly earnings reports from Canadian corporations and the first look at how the U.S. economy performed during the third quarter.

]]>TORONTO – Investors have plenty to sift through this week with traders looking to central bank intentions for interest rates, a raft of quarterly earnings reports from Canadian corporations and the first look at how the U.S. economy performed during the third quarter.

There isn’t any doubt about what the Canadian central bank will do about interest rates — it’s widely expected the bank will leave its key rate unchanged at one per cent.

But there is speculation about what the bank will have to say about raising rates in the future. And that means its statement Tuesday morning will be carefully scrutinized for small changes in wording.

“It sounds as if the bank may back away from their usual rote phrase that they could reduce monetary stimulus if the economy continues to grow above trend, with a very mild so-called tightening bias,” said Doug Porter, deputy chief economist at BMO Capital Markets.

“There’s a chance that they will drop that phrase altogether.”

In any event, Porter said BMO wasn’t expecting the Bank of Canada to do anything on rates for the next year anyway.

“(The wording is) so mild in any event and is qualified by the economy has to grow above potential and it hasn’t been doing that recently. So, there’s no chance of them tightening until the economy grows by more than two per cent and we haven’t seen that for awhile,” he said.

In fact, the International Monetary Fund earlier this month said the Canadian economy will grow slower than expected, along with most of the rest of the global economy.

The IMF projected growth in Canada this year of 1.9 per cent, improving slightly to two per cent in 2013. That compared with the July forecast that saw growth at 2.1 per cent for 2012 and 2.2 per cent for 2013 with growth in Canada constrained by the sluggish U.S. economy.

“And frankly we still think the IMF is a touch too optimistic,” added Porter.

The latest read on U.S. economic growth comes out Friday. The consensus calls for the American economy to have grown at an annualized pace of 1.8 per cent during the July-September period, better than the 1.3 per cent pace of the second quarter, but lower than the two per cent gain chalked up during the first quarter.

The Fed also makes its next announcement on rates this week and analysts aren’t expecting much to come out of the meeting Wednesday, now that the Fed has made it clear it doesn’t plan to move on rates until at least 2015 and has already announced a fresh round of quantitative easing to keep the recovery on the rails.

Timing also plays a part.

“Every meeting is important but now that we know they’re not doing anything about rates and have announced another round of stimulus, I suspect the Fed will do its level best to lay low here with the election just two weeks away from the meeting,” said Porter.

The TSX gained 1.75 per cent this past week after falling a like amount the previous week. The Dow eked out a 14-point gain as U.S. indexes were pressured by earnings news.

The third-quarter earnings reporting season for Canadian corporations moves into gear this week, about two weeks after U.S. corporations started issuing results. So far, American companies seemed to have exceeded expectations.

A survey by Bloomberg said analysts now project a 0.3 per cent drop in S&P 500 earnings for the period, compared with a decrease of two per cent predicted on Sept. 28. Still, it’s the first year-over-year decline since 2009.

Analysts aren’t expecting a strong earnings season for Canada either.

“I think probably something that isn’t dramatic but then not a disaster either,” said Fred Ketchen, manager of equity trading at Scotia Capital.

“Canadian companies for the most part are still taking in revenue, still making profits but they aren’t exciting and I don’t think this earnings season is going to be particularly exciting as we go forward.”

Major companies reporting this week include Canadian National Railways (TSX:CNR) Monday, tech company Celestica (TSX:CLS) on Tuesday and gas producer EnCana (TSX:ECA) and telecom Rogers Communications (TSX:RCI.B) on Wednesday.

]]>Selling stock when it’s going down and buying when it’s going up is irrational, writes Carl Richards, a ski fanatic from Park City, Utah, whose new book The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money is full of ironic advice like, “Don’t just do something, stand there!”

“When the market soars or hits a rough patch,” he writes, “there’s a natural tendency to do something. Fast. Our natural reaction is to sell after bad news (when the market is already down) and buy when news is good (after the market is already up), thus indulging our fear and our greed. It’s an impossible strategy.”

Richards, who is also a certified financial planner, uses the term “behaviour gap” to describe any situation where a person’s behaviour leads to subpar results. For example, if you are lonely, you may feel unsafe, and in an effort to belong, you may buy a new car or some clothes that allow you to blend in. “Meanwhile, you may sacrifice your real financial security in your half-conscious attempts to achieve emotional security.” He tells his clients, “Find out who you are and what you want. Then you can stop wasting your life energy and your money on stuff that doesn’t matter to you.”

Feeling certain that a stock is a great deal? “Overconfidence is a serious problem,” he writes. “If you don’t think it affects you, that’s probably because you’re overconfident. Fortunately, we can do something about it. We can recognize that we’re not as smart as we think we are. The next time you’re about to make an investment decision because you’re certain you’re right, take time to have the ‘overconfidence conversation.’ Find a spouse, friend, or anyone you trust, and walk them through your answers to: what impact will it have if I’m wrong? And, have I been wrong before?”

Speaking of advice, ignore it, writes Richards. “Let’s face it, most of the advice we give and get is useless or worse. People tend to give advice that’s based on their own fears, their own experiences, their own motivations.”

Following a tip you’ve read about is “just dumb.” If you read about it in The Economist, a magazine that sells more than a million copies a week, so did “a whole bunch of people who think they are being clever in exactly the same way at exactly the same time.”

When planning for retirement, don’t get hung up on how much money you’ll need to buy your dream house, he urges. “Just make sure there’s enough in the budget to visit the kids, pay your golf club dues, and maybe see a marriage counsellor when things get bumpy.”

If you’re routinely buying or selling at the wrong time, Richards suggests one alternative is to swear off the stock market forever. “I’m not kidding. Whatever the experts may claim, steering clear of stocks isn’t stupid.”

Or if you’re constantly worrying and fiddling with stocks, try going on an information fast. “We can check the performance of our stock portfolio in the middle of the night, on vacation, at our daughter’s wedding. The trouble is it often makes us feel worse—and eventually we act on our fears.”

Richards, the founder of Prasada Capital Management, confesses that he doesn’t know when it is a good or bad time to buy, and this frustrates friends and family. “It’s bad enough that I don’t know where the market is going. People are still more confused when they find out I don’t even care. Believe it or not, the ability to build and protect wealth is often inversely related to knowing what’s going on in the market. I tell my clients: it’s a terrible idea to try to predict the market’s movements. Worse, it makes people anxious—and anxious people screw up.”

Focus on personal goals, he writes. If your financial goal is to send the kids to college, “tracking the performance of the Dow this week is not going to help you reach that goal.”

He tells the story of an older woman, worried how events in Lebanon might affect her portfolio. “I told her two things. ‘First, Lebanon isn’t going to play a major role in what happens to you. Second, there is not a thing you can do to influence events in Lebanon.’ Then I asked her, ‘Given those two facts, why are we talking about Lebanon?’ ”

]]>https://www.macleans.ca/economy/money-economy/advice-for-investors-from-the-book-of-dow/feed/1What do financial markets have in store for 2012?https://www.macleans.ca/economy/business/when-even-the-pros-falter/
https://www.macleans.ca/economy/business/when-even-the-pros-falter/#commentsThu, 19 Jan 2012 14:10:01 +0000http://www2.macleans.ca/2012/01/19/when-even-the-pros-falter/The markets have been ugly, but there is reason for optimism, say experts

When one of the world’s most experienced money managers talks of “paranormal” activity in today’s markets, you know these are treacherous times for average investors. “It’s as if the Earth now has two moons instead of one,” mused Bill Gross in his first investment letter of 2012. Gross, the head of a $244-billion bond fund at Pimco, one of the world’s biggest fund managers, lost $5 billion in redemptions last year, as clients pulled money out of his fund after a string of bad (but at the time seemingly rational) bets against U.S. Treasuries.

If not paranormal, 2011 was the year when volatility went viral. Bad luck played a part, with large swaths of the Japanese economy swept away by the tsunami. Mostly, though, the uncertainty that rattled investors was man-made, as bickering policy-makers in Brussels and Washington seemed to gamble with the fate of the global economic recovery. Stocks on the Standard and Poor’s 500 Index swung twice as much as they did, on average, in the last 50 years, only to close roughly where they had opened 12 months earlier, according to Bloomberg. The Dow Jones Industrial Average closed up by just six per cent, and the NASDAQ went down two per cent. Even more disappointing was the TSX, which closed the year down by 11 per cent.

Gross wasn’t the only pro who faltered in a year when, in addition to wild volatility, market activity slowed. U.S. broker-dealer MF Global Holdings Ltd. went belly up in November after betting $6.3 billion on European sovereign bonds. Last October, Goldman Sachs posted its first quarterly loss since 2008. Eager to protect profits and reputations, some financial firms are resorting to desperate measures—Dutch Bank ABN AMRO even introduced a tool called the Rationalizer, which measures emotional arousal levels through skin sensors and advises traders to take a break or wind down their transactions if they get too elated or frustrated. All this raises a troubling question: what chance does the average investor stand? Even those who played it safe by turning to things like guaranteed investment certificates and principal-guaranteeing investment vehicles were left languishing. With interest rates at near-zero levels, baby boomers are approaching retirement with unexpectedly undersized nest eggs. Mounting resentment against financial advisers, meanwhile, had Canadians choosing to try to go it alone. The number of accounts registered with online brokerages has increased by 36 per cent since 2008, according to Investor Economics, a Canadian financial services research company.

By most accounts, 2012 is poised to be just as difficult as last year, given the lingering uncertainty about European economies and the sputtering global recovery. But economists and advisers still see some reason for optimism, and no reason to sit still or be scared. As Warren Buffett famously said: “Be fearful when others are greedy, and be greedy when others are fearful.” This year, then, may well be the time to risk a little bit again.

A number of experts see the potential for growth in the United States. Eric Lascelles, chief economist of global asset management at the Royal Bank of Canada, says he is “cautiously optimistic” about the recovery south of the border. Recent data supports investors’ higher hopes in Uncle Sam. According to the Manufacturing ISM report, manufacturing activity across the U.S. had its 29th consecutive month of growth last December. Confidence among small businesses was also pointing upward in December, for the fourth straight month. And, crucially, unemployment has finally started to fall. Most importantly, U.S. corporate profits have been steadily rising since 2010. After plummeting between 2007 and 2009, they reached a record $1.97 trillion before taxes in the third quarter of 2011, according to the latest data by the U.S. Department of Commerce.

So far, little of that money has been feeding back into the economy, says Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC). Concerns about teetering global growth and uncertainty at home have discouraged corporations from translating their healthy balance sheets into capital investment, he explains. It’s bad news for America’s unemployed, but good news for investors holding blue-chip, dividend-yielding stocks. With so much cash idling in companies’ coffers, corporations are likely to pass on more earnings to shareholders. Standard and Poor’s expects the dividend yield of its S&P 500 index to grow by 11 per cent this year.

For those feeling skittish about holding equities, there are still attractive picks in the fixed income market, says Mark Neill, head of PH&N Investment Services, a Vancouver-based investment management firm that is part of RBC’s Global Asset Management. There are a number of good-looking high-yield corporate bonds tied to U.S. and Canadian companies, especially those with exposure to emerging markets. Yes, we’re talking about so-called “junk bonds.” But don’t let the term scare you, says Neill. “Some of these bonds, among the ones rated B and higher, are good enough quality.” They’re a solid alternative to the low-yield government bonds that crowd most Canadians’ portfolios, he adds.

Others like bets on companies that will be largely unaffected by a potential slowdown in global growth, whether it’s in equities or debt. As the IIAC’s Russell sees it, two trends are almost certain to carry through 2012 and the foreseeable future: emerging markets will continue to add to the global middle class, and developed economies will add to the ranks of seniors and retirees. There are opportunities in both trends. As an ever-larger share of the world’s population can afford not to go hungry, for example, companies tied to shifting global food patterns have become financial markets champions. Take agricultural equipment manufacturer John Deere, whose net income per share grew by over 50 per cent in fiscal 2011 from a year earlier; or food-maker Kraft Foods, which was one of the leading performers among the 30 components on the Dow, with gains in the value of its class A shares of about 23 per cent from a year earlier. Other big winners were health care stocks, which rose by 13 per cent through the year, led by pharmaceutical giant Pfizer Inc., according to Bloomberg. Aging baby boomers may represent one of the few sources of fat profit from Europe, quips Russell.

Still, don’t expect smooth sailing in 2012. The volatility that dominated 2011 could well continue. Policy-makers on both sides of the Atlantic will, in all likelihood, keep driving fearful market movements, “and they are unpredictable,” warns RBC’s Lascelles. In Europe, a collapse of the common currency seems more unlikely—though it’s not impossible—adds Russell, but European lawmakers will probably continue to rush through patch-up measures to calm the markets when investors become jittery. They will likely postpone as long as possible the “bazooka approach” to fiscal policy (like the massive bailout launched by the U.S. Federal Reserve in 2008) needed to put the European Union on a stronger footing. The consensus? Expect a continent-wide recession.

Similarly, in Washington, the looming presidential election will only exacerbate the partisan divide that paralyzed Congress throughout 2011, and caused the U.S. to lose its Triple-A credit rating last summer. “They will continually run into debt ceilings and create mini- crises,” preventing the economy from reaching its growth potential, predicts Russell.

Meanwhile, Canada, after much talk about its standout growth in recent years, may have finally maxed out (or at least lost some of its appeal among investors). “Home ownership and consumer borrowing are at record highs, the resource sector is slowing down,” muses Murray Leith, VP and director of investment research at Odlum Brown Ltd., a Vancouver-based investment management firm. And according to Bank of America Merrill Lynch, this will be the year when our housing market finally starts to deflate—albeit gradually, with housing investment most likely contracting by a moderate five per cent in the first six months.

Financial advisers continue to advise caution. The usual arsenal of common sense recommendations still applies: make sure you know what you own, that your portfolio doesn’t look like the TSX, and that you’re well diversified. In sum, it may be fine to dip your toes back into the markets—but pick your entry points carefully and don’t dive in blind.

]]>https://www.macleans.ca/economy/business/when-even-the-pros-falter/feed/2Broker-in-Chiefhttps://www.macleans.ca/uncategorized/broker-in-chief/
https://www.macleans.ca/uncategorized/broker-in-chief/#commentsTue, 07 Oct 2008 22:01:34 +0000http://macleans.wordpress.com/?p=11832Stephen Harper was probably smart not to try feigning an emotional response today over the state of the economy. The Prime Minister would have looked phony.
But did he really…

]]>Stephen Harper was probably smart not to try feigning an emotional response today over the state of the economy. The Prime Minister would have looked phony.

But did he really need to talk in Toronto like a broker trying to coax a reluctant dentist into risking a few bucks on a hot tip in a bear market?

“I’m not the most emotionally expressive guy, but I understand, I understand in my own family, that people are pretty shocked by developments in the stock market,” he told reporters in Toronto.

“Look,” he went on, “the main thing the government has to do in a time like this is not panic. A lot of people out there are panicking. I think there are probably some great buying opportunities emerging on the stock market as a consequence of all this panic.”

But the market churn, though it’s pretty scary, isn’t really the root worry of most Canadians. What’s got people spooked is the notion that it’s their mutual funds now, but might be their jobs soon. The PM says he understands, but not if he really thinks its about the TSX. It’s about what comes next.